Aviation ministry takes on airport regulator

New Delhi: The civil aviation ministry has waded into battle with the airport regulator, seemingly angered by the watchdog body having sought and received the attorney general’s endorsement of its independence.

The aviation ministry has now asked the law ministry whether its views are binding on the Airport Economic Regulatory Authority, or Aera, according to two aviation ministry officials, who declined to be named. Aera, which was set up in 2009, is drafting the tariff structure for the country’s high-traffic airports, a process that could be held up by the row.

The regulator had sought the opinion of the attorney general in November on whether it would have to follow the aviation ministry’s directions. The attorney general had said that being an independent regulator Aera didn’t need to do so.

Aera is drawing up the tariff structure at a dozen of the country’s key airports, including Delhi, Mumbai, Hyderabad, Bangalore, Chennai and Kolkata, which will see a total $7 billion (Rs31,780 crore) of investment until 2012.

“They jumped the gun,” said one of the ministry officials cited above, referring to Aera seeking the attorney general’s opinion. The ministry had appointed Mumbai-based consultants BridgeLink Advisors to prepare a report that would have formed the basis of its views on the tariff structure.

The attorney general’s view wasn’t tenable because Aera had sought it without following the defined protocol, said the official cited above.

“It’s a private opinion. Aera had to first refer the matter to the aviation ministry, then we would have sought the law ministry’s views,” he said. “We have asked all the organizations under the ministry not to take such a step in future.”

The ministry’s response on the tariff structure will depend on the law ministry’s opinion.

There was no question of any breach by the agency, said another government official familiar with the development, as the guidelines for “statutory” bodies such as Aera say that the head of a regulator can write directly to any other minister and does not need to go through the “administrative ministry”.

Aera had sought the attorney general’s opinion after eight months as it had not received any “formal comments” on the regulatory approach from the aviation ministry on the consultation paper it put up in February 2010, this official said.

“In any case, even if there was a procedural problem, can the opinion of the attorney general be different on the same matter?” he said.

Aera announced in January that tariffs would be based on the so-called single-till system at most airports, putting the regulator at odds with those who run the facilities as the move will lower fees that passengers and airlines pay.

GMR Infrastructure Ltd, which runs the Hyderabad and New Delhi airports, GVK Power and Infrastructure Ltd, which runs the Mumbai and Bangalore airports, and Cochin International Airport Ltd (Cial) have appealed against Aera’s decision, Mint reported on 15 February. They prefer the dual-till system in which proceeds from the sale or lease of commercial land won’t be used to subsidize airport development.

The new tariffs can be implemented only after the matter has been resolved by the appellate authority.

An executive working for a private airport said the delays are likely to have financial implications for ongoing projects and that the government needs to clearly define public-private partnership project terms.

“There are regulators in power, roads, airports, but if the government sets a policy and the regulator comes in later and disagrees with it, after the investments have been made, the question is who will call the shots,” he said. “I think it’s a matter to be debated by the government at a broader level.”

While Aera was set up about two years ago, key airports were privatized earlier in the last decade. The aviation ministry and the Airports Authority of India were the decision-making bodies for airports until the regulator was established.

“Aera must do its job as per the mandate given to it by Parliament,” said G.R. Gopinath, who pioneered low-fare carriers in India with Air Deccan, since sold to Kingfisher Airlines Ltd. “And its single aim should be what is in the larger interest of the country, rather than what is good for Jet Airways, Captain Gopinath or GMR.”